Joining a division of the United States military is a major life decision. Active members of the military face a lot of different challenges than the average American, including a specific set of tax laws, deductions, and credits. Luckily, much of the confusion surrounding military taxes is based on rumors and misconceptions. To help any of my readers serving our country I have put together the following article explaining taxes for members of the military.
Despite what many believe, military personnel are not required to file their tax returns while away on duty. If you are married filing separately, your spouse will not need to worry about filing a tax return on your behalf either. However if you file a joint return, then your spouse – with a power of attorney – will need to file a return before the standard April 15th deadline. Once you return home, you can apply for an automatic extension of up to 180 days. This extension applies to filing your return, paying your taxes, contributing to IRA's and making claims for a refund.
Some members of the military fear they will be unable to pay their taxes while away for combat. Fortunately, active members of the military serving in a combat zone get the special privilege of not having to pay Federal income taxes on any income made during that time. For officers, there is a cap at the highest rate of enlisted pay, as well as any hostile fire or imminent danger pay received. Since having tax-free income is so rare, the IRS encourages members with such an opportunity to contribute the money to an IRA or tax friendly savings account.
Military personnel often need to travel to fulfill their duties. If you have to travel more than 100 miles to perform any reserve duties, all un-reimbursed travel expenses can be deducted from your taxable income. If you need to permanently re-locate stations the IRS will even allow you to deduct reasonable un-reimbursed moving expenses. Likewise, certain job search and travel expenses are deductible.
Call to Duty Penalties
Some active members of the military will sacrifice a significant portion of their earning in leaving their regular jobs to serve in the military. If you are in this situation and are forced to withdraw funds from a retirement account, then the IRS will frequently waive the associated penalty. However, this can be a tricky situation and I recommend speaking with a tax professional experienced with military taxes before making any withdrawals.
Military Academy Costs
Members of the military who received payments from a Coverdell Education Savings Account or Qualified Tuition Program are exempt from the 10% tax on funds not used for educational expenses. However this is only so long as they are attending a U.S. Military, Naval, Air Force, Coast Guard or a Merchant Marine Academy and the payments do not exceed advanced education costs.
Uniform Up-Keep Expenses
Some military officials are required to wear certain uniforms wherever they go, which can result in a hefty dry cleaning bill. Luckily, most members of the military can get these fees reimbursed or waived completely. However, if you are forced to pay for these fees out of pocket then you can deduct all of the costs.
Further Tax ComplicationsThe U.S. tax code is complicated and difficult to understand, especially for active members of the military. Fortunately, most personnel qualify for free tax assistance from VITA (Volunteer Income Tax Assistance Program). The program utilizes volunteers trained by the IRS who provide free tax help to members of the military. These services are usually available on base or in your local area. For more information on military tax issues be sure to check out IRS Publication 3.